Freight weekly report

please print
---------------------- Forwarded by Jeffrey A Shankman/HOU/ECT on 01/16/2001
09:54 AM ---------------------------

Enron Capital & Trade Resources Corp. - Europe

From: Chris Connelly 01/14/2001 11:36 AM

To: George McClellan/HOU/ECT@ECT, Stuart Staley/LON/ECT@ECT, Jeffrey A
Shankman/HOU/ECT@ECT, Mike McConnell/HOU/ECT@ECT, Kevin
McGowan/Corp/Enron@ENRON, Tom Mcquade/HOU/ECT@ECT
cc: Peter Bradley/LON/ECT@ECT, Jez Peters/LON/ECT@ECT, Candace
Parker/LON/ECT@ECT, Kenny Nicoll/LON/ECT@ECT, Dimitri Taylor/LON/ECT@ECT,
Andy James/EU/Enron@Enron, Cornelia Luptowitsch/LON/ECT@ECT, Dorte
Kjaergaard/LON/ECT@ECT, Fiona Ryan/LON/ECT@ECT
Subject: Freight weekly report

Enron Shipping Services Weekly report 02/2001

Highlight

The cape market continues to slide ever southward with owners unable to
repeat last done on rates obtained. Richards bay to Rotterdam rates have
fallen about $2 in 45 days ( key coal route ) and Brazil to China rates have
fallen $3 in the same period ( key iron ore route ) which has owners running
for cargo coverage. However charterers smell blood and are not willing to
enter into freight contracts ( Edf trading and NCSC are playing spot and so
are we ). Even the mighty Bocimar seems unable to turn the tide and are
offering us cheap rates on the quiet as they keep playing their vessels spot
and are being run over. The average cape rate has lost $ 4200 from its peak
and hangs around $20,400 presently. To get cargo contracts for the balance
of the year an owner has to fix his vessel at around $16,000 to get
charterers willing to agree. The downward fall is the result of two
concurrent market shifts 1- coal shipments into Europe have slowed 2- market
is predicting that sometime in Q1 2001 , Japanese steel mills will cut back
on production and reduce their raw material imports. As a result, you have
on one side, Japanese vessel owners panicking as they fear that their main
account ( Japan ) will not need their vessels shortly and you have the
European owners also worried as they are seeing their utilities postponing
their coal requirements. Furthermore, the holiday season in Asia is
approaching and little activity is predicted for the next few weeks.

On the panamax front, the outlook is still very bleak as you now have about
two new buildings being launched per week in a market which is currently well
balanced. In the spot market, the Atlantic is weak as the grain out of the
US gulf is slow as the main rivers are frozen upstream and the vessels have
little to load. In the east the market is strong as there is a flurry of
grain activity but in the paper market, February is already traded at a big
discount to Jan as people predict a quick slowdown in the activity as Asia
goes on holiday.

On the long term strucutred front, last week we agreed to charter a new cape
building starting in late 2003 for 10 years with an option for an 11th, 12
th, 13 th and 14 th year. Furthermore, we have the option to buy the vessel
after year 3 at a fixed agreed Japanese yen amount ( if currency goes our
way, we buy the vessel dirt cheap !!!). The counterparty in Mitsui, a big
and financially strong Japanese company. The deal is still subject a few
details but we hope to be able to book this deal within the next 5 months
when the ship building contract will be drawn up.

Also last week we had about 6 banks over a period of three days come to our
office to discuss possible opportunities in the shipping world and to get
them to trade on EOL. Larry Lawyer and Simon Crowe organized the meetings
and we expect a few of these leads to pay off sometime this year.

Market
Short term Medium term Long Term
Handy Max Down Down Down
Panamax Flat Flat Down
Cape Size Down Down Down

Cape

Average time charter rate: $ 20,400
Spot RBCT/Rotterdam: $ 9.30
Spot Tubaro/China: $11.30
Spot Bolivar/Rotterdam: $ 7.35

Panamax

Average time charter rate: $ 11,200
Spot US Gulf/Japan: $21.20

Deals Done
Physical Freight
ECS freight
Fixed a Cape from Keoyang from RBCT/Hunterstone at $9.40
Fixed a Panamax from Norden from Drummond/Liverpool at $ 8.50
Fixed a Panamax from Transfield from Santa marta to Hit at $10.20
Fixed out a panamax to transfield on time charter which was spot open in US
gulf
Third parties freight deals
Sold 4 Cape cargoes to Eastern Rich from Brazil to China at $9.80
OTC
FFA s
Numerous swaps on both the Cape and Panamax routes

EOL
Traded with Cargill, Edf trading, Navios and have now traded over 3 million
tons LTD

Travels
Pierre will be in Paris on Monday but Andy and I should be in all week.

Chris